Kenya and South Sudan share a unique relationship with untapped economic potential. This concept note outlines two proposals that can redefine this relationship for mutual benefit. These proposals align with Kenya's commitment to a robust foreign policy centered on economic diplomacy.
Project Goal 1: Establishing a Stable Exchange Mechanism for Kenya Shilling/South Sudan Pound
The first goal focuses on creating a stable central bank-backed exchange mechanism between the Kenyan Shilling (KES) and the South Sudan Pound (SSP). This system aims to facilitate affordable inter-country mobile money transfers, which are crucial for the thriving "Hustler" enterprise.
Expected Outcomes:
1. Increased Mobile Money Remittances: By introducing a more affordable, formal, and trackable system, mobile money remittances from South Sudan to Kenya could increase by over 50%.
2. Reduced Demand for USD: This initiative can reduce the dependency on the US dollar in favor of SSP within South Sudan's market, contributing to a more stable local economy.
3. Stable South Sudan Economy: A stable local economy in South Sudan becomes an attractive market for a wider array of Kenyan-made goods.
4. Enhanced Capital Flow: Easier capital flow between the two countries will spur Hustler businesses in both South Sudan and Kenya.
5. Job Opportunities: A stable SSP with a predictable exchange rate will open up job opportunities for more Kenyans in South Sudan.
Project Goal 2: Re-Designing Trade Relations with a Hustler Business Focus
The second goal involves rethinking trade relations between Kenya and South Sudan to prioritize Hustler businesses over big corporations. The current model heavily favors large enterprises, and this proposal aims to rectify that imbalance.
Expected Outcomes:
1. Empowering Hustler Enterprises: More Hustler enterprises will be established, re-established, and will thrive in South Sudan, fostering economic growth.
2. Responsive Trade Policy: A trade policy that caters to the needs and aspirations of Kenyan Micro, Small, and Medium-sized Enterprises (MSMEs) will be established.
3. Profitable MSMEs: Kenyan MSMEs operating in both countries will become profitable due to the removal of non-trade barriers and faster response to emerging challenges.
4. Formalization of MSMEs: Formalizing MSMEs' business activities will enable tax collection, benefiting both governments.
Justification
The current financial infrastructure in South Sudan heavily favors big businesses, leading to the exclusion of MSMEs. This approach has negatively impacted the local economy and currency, making it challenging for Kenyan businesses to operate in South Sudan.
These proposals are supported by four perspectives: Kenyan MSMEs, South Sudanese with ties to Kenya, macroeconomic factors, and sustainable peace and security.
1. Kenyan MSMEs: The current system hampers small businesses' ability to operate in South Sudan, leading to business closures and financial challenges.
2. South Sudanese Ties to Kenya: South Sudanese living in Kenya rely on remittances to support their families back home, and the scarcity of USD makes this process difficult.
3. Macroeconomic Perspective: South Sudan's economic challenges are exacerbated by a weak SSP and ongoing conflicts, leading to a volatile exchange rate.
4. Sustainable Peace and Security: Empowering Hustler businesses can contribute to stability in fragile states like South Sudan.
**How to Achieve These Goals:**
Goal 1: Establishing a Stable Exchange Mechanism
- Establish a central bank-backed infrastructure for inter-country currency exchange and mobile money transfers. We could borrow from ERM of the European Union in 1979 model.
- Encourage collaboration between the central banks of Kenya and South Sudan.
- Engage telecommunication companies and banks with a presence in both countries.
- Provide capacity building and regulatory support.
Goal 2: Re-Designing Trade Relations
- Strengthen infrastructure, including highways and border posts.
- Advocate for eased work permit restrictions for Kenyan workers in South Sudan.
- Establish a dedicated desk for MSMEs in the trade attaché's office.
- Implement policies for the portability of social protection.
- Ensure presidential support and collaboration between central banks, ICT ministries, telecommunication companies, banks, and embassies.
Conclusion: These proposals offer a strategic framework for transforming the economic relationship between Kenya and South Sudan. By prioritizing the Hustler business sector and establishing a stable currency exchange mechanism, both countries can unlock economic opportunities, strengthen their economies, and contribute to regional stability. This initiative requires cooperation at various levels, but the potential benefits make it a promising endeavor for both nations.